Comparative Guide to Stablecoins 2019
The infamous instability of the crypto market has brought forth a new class of cryptocurencies – stablecoins. Here’s a short comprehensive list of all the stablecoins out there at this moment.
Cryptocurrencies have been making headlines for almost a decade now, but the volatility of the cryptomarket has been keeping them from meeting their full potential as valid currencies that can replace fiat money altogether.
With that in mind, crypto innovators have been looking for a way to stabilize the field and give people something solid to hold. This is how stablecoins came to be. These cryptocurrencies that promise that they won’t fall to the volatile trends of the crypto market have experienced an amazing boom in the past year, and will only continue to grow. So if you are looking to learn more about having a stable store of value on the crypto market, you should keep reading.
AAA coins have backing that comes from multiple fiat currencies and it is collateralized by AAA investments, gilts, and cash. However, when one looks at their model, they are too centralized and they basically just operate as a tokenized investment fund.
Circle – USDC
USDC is a stablecoin with full US dollar collateralization. It is based on an asset-backed framework developed by CENTRE. It has a fully transparent system and it works with established auditors and partners. The main flaw of this currency is that the management keeps the right to blacklist addresses or freeze funds at their discretion, which brings the apolitical aspect of their offer into question.
Gemini is a project that had the goal of making transactions between cryptocurrencies and fiat currencies interact in an efficient manner. And, to create a representation of the dollar in the crypto environment, they created the Gemini dollar. A stablecoin that is pegged to the value of the US dollar. The main con of this coin is the fact that it is not decentralized and is thus potentially unsafe in terms of manipulation.
Globcoin is a project that boasts about offering numerous of interesting features for stablecoin investors. This coin will have a base coming from a basket of 15 different fiat currencies and gold, giving it solid stability. The main con of this project is the fact that the team doesn’t have enough blockchain specialists, making the project subject to various technical and security issues.
The PAX token this platform uses has full backing thanks to USD deposits and it has so far managed to keep the volatility that follows cryptocurrencies at bay. A big part of that success lies in the fact that it is backed by the New York State Department of Financial services. However, that is also the main flaw of this token. It simply isn’t decentralized enough.
As with other USD-backed currencies, each StableUSD is redeemable for 1 US dollar. It is built on the Stellar blockchain and it can work incredibly quickly. But, at this point, it is standing at almost a full percent under the value of a dollar and it has shown volatility that those who want to invest in stablecoins usually avoid.
Stasis is a stablecoin platform coming from Malta and it is backed not by the US dollar, but rather by euro. To prove their fairness, they have contacted an accounting firm to conduct audits every 3 months to prove the euro backing for all tokens. However, getting a hold of these tokens can be incredibly difficult.
Stronghold is a financial platform that is offering a stablecoin for potential investors. The coin itself is pegged to the value of the US dollar and it works on Stellar. While Stronghold has a lot of potential, it still seems to be unsuccessful in maintaining its value peg.
Tether – USDT
Tether is the first stablecoin to reach world-wide fame. The main pro is that Tether is the most popular stablecoin that was pegged to the value of a US dollar. The main con, however is the fact that the coin has been going through some trouble due to various controversies that have plagued its existence. They no longer claim that each token is backed by a US dollar and the value has fluctuated by as much as 10%.
TrustToken – TrueUSD
TrueUSD is backed by the US dollar. Every single TUSD token one has can be exchanged for 1 dollar. It was created as a response to the fact that Tether failed to provide audits that prove that they can truly back their tokens. To solve that issue, TrueUSD entered a partnership with banks and fiduciaries that can handle the funds. The con is that TUSD’s stability didn’t hold up well during extreme market trends.
X8 Currency and X8X Utility are two tokens that the X8 Project is using to offer people a chance to invest in a stable coin that is fully backed by 8 different fiat currencies and even gold. The system itself is well-thought of and it offers some interesting features. The main flaw it has lies in the fact it is incredibly complicated to use.
BitShares is a company famous for creating multiple stable coins. That proves that they have experience in the field that is still very new and that they know how to set up transparent transactions without human interference. But, and the issue is big, to purchase a BitUSD coin, one has to be willing to lock up $2 instead of $1.
Havven – NUSD
Havven is a platform that is pegged to the value of the US dollar, much like many other stablecoins. And it is collateralized by Havvens. The cons of the nUSD coin is that the platform failed to provide technical details about the workings of their system, their solution, and they completely failed to address scalability.
MakerDAO – DAI
Maker dao is pegged to the value of the US dollar. But, it is actually backed by Ethereum. This system leverages smart contracts to maintain a form of price stability. However, the value still goes up and down by several percent as the market fluctuates.
Algorithmic Supply Stablecoins
Anchor is a two-token stable digital currency pegged to a new, algorithmic financial standard, the Monetary Measurement Unit (MMU). The MMU provides the most accurate available measure based on the growth trend of the global economy, which increases annually while fiats are in consistent decline. Anchor offers a unique solution to the core global economic issues of depreciation and volatility by providing stability and predictability. The individual Anchor Token is pegged to the MMU and the potential volatility is controlled through several mechanisms and redundant failsafes that make the coin a safe investment.
Basis was one of the best algorithmic tokens around and the value of this currency was pegged to the basket of goods. But, due to regulatory issues, they had to shut down the project in December 2018.
Carbon works on a daily basis to determine the exact adjustments needed to make sure that the coin remains stable. It uses a proprietary distributed oracle model on a graph-based platform. The use of Hashgraph makes it one of the fastest stablecoins out there. However, it also makes it dependant on the mainnet launch of Hashgraph.
Fragment is very similar to Basis. However, it uses an elastic model and is bound to three different assets: their stablecoin (USD Fragments), reserves, and bond tokens. But, when the prices are falling the holders lose any power of decision making. That makes it so that Fragment depends on their investors holding the tokens in the long term.
Kowala is a stable coin with a dual-token system that has mining and stable-value tokens to balance out the cost. But, they don’t offer any proof of the existence of their collateral.
Hybrid Stablecoin Models
Aurora – Boreal
Boreal, the coin of the Aurora platform is a stablecoin that has the backing of Ether reserves, loan repayment demand and retailer endorsement. They are generating interest and demand for this currency by giving a discount for traders on IDEX if they choose to use Boreals. The main con of this coin is the fact that, should the interest fall through, so would the coin.
Saga is an “elastic” stablecoin, meaning that it isn’t collateralized in any way. Instead, they function through a simple principle of supply and demand. They are decentralized and can be very efficient. But, to properly work, they need their platform to keep growing. Market crashes can cause a lot of issues for Saga.
Alternative Stablecoin Models
Celo is a stablecoin that was made to serve a platform for smartphone payments. It is backed by US dollars and has a contraction-expansion based system to create stability. But, thise stablecoin feels like an afterthought of a different platform goal and lacks several aspects.
Phi is a service that offers decentralized lending and features a stablecoin of their own. Their main goal was to offer a loan system without the use of banks. And, the creation of a stablecoin was just an afterthought. As one can imagine, that poses a huge issue for those who plan to invest in this platform for the sake of holding stablecoins, as the system doesn’t seem very well thought-out.
The price of Terra is pegged to a basket of currencies and, at the beginning of their path, they basically just mirrored the way SDRs work. But, over time, the idea is to have Terra include other goods and services. That way, they can remove from the fiat dependency they have right now. We don’t know yet whether or not the project will have a running start, but it is far from fully developed at this point in time.
Digix Global is a stablecoin whose value is not pegged to fiat or crypto currencies. Instead, the value is pegged to the cost of 1 gram of gold. In essence, this can sound like a great idea. However, the price of gold is too volatile to be used as an effective stablecoin peg long-term.
The idea behind HelloGold is to allow investors to buy tokens and know that they are entitled to a comparable measure of physical gold. The gold is to be held in Singapore in the vaults of HelloGold. But, their fees might stop many potential investors from buying their tokens.
(This comprehensive list will be updated whenever new stablecoins enter the market)
Disclaimer: The information provided in this post is not legal, accounting, or financial advice. I am not a lawyer, accountant, or financial advisor. I am not registered as an investment adviser with any federal or state regulatory agency. The Information should not be construed as investment or trading advice and is not meant to be a solicitation or recommendation to buy, sell, or hold any cryptocurrencies.
Title photo by frankie's, Shutterstock.